Category: Perspectives

What Standard of Care Applies When Engaged in Fitness Activities?

Posted on by Kelly McElroy

The fitness industry, while promoting health and wellness, is not immune to legal challenges. Businesses in this sector, particularly in states like Connecticut, need to be vigilant about potential litigation, especially concerning negligence and contract breaches. This article aims to guide fitness facility operators on how to mitigate these risks, incorporating real case examples and legal principles.

Understanding the Risks: Negligence  

Negligence forms the core of many lawsuits in the fitness industry. Cases often revolve around personal training, where trainers may fail to consider clients’ medical conditions, provide unsuitable exercises, or inadequately supervise workout sessions. These oversights and decisions can lead to severe injuries, ranging from fractures to more serious conditions like heart attacks or strokes due to overexertion.

In Connecticut, the standard of care in fitness-related injuries can vary based on the nature of the activity. Importantly, Conn. Gen. Stat. § 52-572h makes clear that a participant’s assumption of the risk does not bar recovery in negligence actions in Connecticut and instead, the standard of “comparative negligence” applies.

The Connecticut Supreme Court in Jaworski v. Kiernan (1997) established that the duty owed to a participant in a sport where physical contact is inherent or expected is not to engage in reckless or intentional conduct, rather than the ordinary standard of acting in a reasonable manner under the circumstances.

However, this heightened standard of care does not always apply.  In Jagger v. Mohawk Mountain Ski Area, Inc. (2004), the court found that, in non-contact sports like skiing, participants are expected to engage in the sport reasonably and appropriately. This “ordinary” standard of care has also been applied in evaluating whether providing standard fitness safety equipment (in the form of a yoga mat) was actionable conduct Schmus v. Davis (2021) and even in sporting activities where physical contact seems unavoidable – like boxing – where the plaintiff, as a trainee, enlisted the defendant trainer, as a trainer for instruction in fitness boxing. They were not co-participants in an athletic contest. Robles v. Dean (2017).

Practical Steps to Mitigate Risks

  1. Regular Equipment Maintenance and Safety Checks: Regularly inspect and maintain equipment to prevent accidents.
  2. Qualified Personnel: Employ qualified trainers and ensure they are well-versed in handling diverse client needs and health considerations. This reduces the risk of injuries due to inappropriate training methods.
  3. Effective Use of Waivers: Develop comprehensive and specific waivers, clearly outlining the risks involved in various fitness activities. Remember, the clarity and specificity of a waiver can be pivotal in legal defenses.
  4. Emergency Protocols and Staff Training: Establish clear procedures for handling injuries and emergencies. Ensure all staff members are trained to respond effectively and document incidents thoroughly.
  5. Insurance Coverage: Maintain adequate insurance to cover potential claims. This not only provides financial protection but also ensures compliance with legal standards.
  6. Legal Consultation: Regularly consult with legal experts to ensure that all operational practices, contracts, and waivers align with current laws and regulations.
  7. Client Communication and Education: Educate clients about the risks associated with fitness activities and the importance of acknowledging their health conditions and limitations.

By addressing these key areas, fitness facilities can significantly reduce the risk of litigation. It’s not just about legal protection; it’s also about creating a safe and responsible environment for clients to pursue their health and fitness goals.

 

This article is intended for informational purposes and does not constitute legal advice.

(Paul Fenaroli is an Associate Attorney at Pastore admitted in Connecticut and the District of Connecticut. He provides private companies with a full range of business law services covering formations, mergers, acquisitions, corporate governance, securities offerings and litigation)

Personal Financial Data Rights Rule: Strategies for Financial Institutions

Posted on by Kelly McElroy

Financial institutions are vulnerable to the complex and dynamic regulatory landscape. Forty-two percent of organizations cited facing regulatory issues and compliance changes within the next 2-5 years as a top challenge. Financial institutions must be adaptable and remain informed on the latest industry regulations to operate effectively.

An example is the new Personal Financial Data Rights rule (PDFR) the Consumer Financial Protection Bureau (CFPB) proposed on Oct. 19, 2023. The proposed rule is the first application to implement Section 1033 of the Consumer Financial Protection Act, which charged the CFPB with implementing personal financial data sharing standards and protections. The CFPB expects to cover additional products and services in future rulemaking.

Currently in its notice-and-comment period, which will end on Dec. 29, 2023, the proposed rule would require depository and nondepository entities to:

  • Make some data regarding consumer transactions and accounts available to consumers and authorized third parties.
  • Establish obligations for third parties accessing a consumer’s data, including important privacy protections.
  • Provide basic standards for data access.
  • Promote fair, open and inclusive industry standards.

The requirements would be implemented in phases, with larger providers being subject to them much sooner than smaller ones. Community banks and credit unions with no digital interface with their customers would be exempt from the rule’s requirements.

If approved, this will profoundly change how financial institutions handle consumer’s financial data and present compliance challenges. Financial institutions failing to comply with the proposed PFDR rule could face legal ramifications such as civil penalties, cease-and-desist orders, reputational damage and consumer and data breach lawsuits. Specific legal implications will depend on the nature of the violation, consumer damage and relevant laws and regulations in effect at the time.

Although the PFDR is still in the proposal phase and subject to change, it’s key for financial institutions to take steps to minimize risks.

Here are some strategies to consider in preparation:

Focus on Compliance

To increase compliance, carefully review the PFDR rule and its requirements. Be sure to examine crucial areas such as data access rights, data use restrictions, data security standards and covered data. Review your current procedures and practices to determine which ones may not comply. Then develop a thorough implementation plan defining the actions to achieve compliance. This includes timelines, communication strategies and resource allocation.

Take a Proactive Approach to Data Management

Thoroughly evaluate any third-party service providers and vendors who access your customer data to ensure they comply with the PFDR rule’s data security and privacy requirements. In addition, clarify data access rights in user agreements and contracts with those parties. To limit third parties’ use and disclosure of data, apply contractual provisions.

Additionally, boost your data security by applying robust cybersecurity actions. This will protect your customer data from unauthorized misuse and breaches. In a breach, be prepared with a well-defined incident response plan.

Build Consumer Trust

It’s imperative to communicate with your customers about what the rule is and what their data rights are, along with providing educational materials and other resources. To make certain your customers understand and approve how their data will be used and shared, provide detailed consent procedures.

Restrict authorized third-party data usage by creating firm policies and verifying that the data will only be used for authorized purposes and not shared or sold without consent. Finally, employ effective processes for responding to customer complaints and inquiries concerning security and data access.

Seek Legal Counsel

Consulting with legal counsel with expertise in the financial services industry will help you navigate the PFDR rule complexities and ensure compliance. The specific legal approach will depend on your financial institution’s unique circumstances.

Skilled legal counsel can address your concerns and increase compliance by:

  • Keeping you informed on developing regulations and providing guidance through existing changes to data procedures.
  • Providing guidance on how to comply with the rule while evaluating consumer privacy and data security concerns.
  • Addressing potential legal issues swiftly and effectively to mitigate risks.
  • Handling litigation risks and guarding against potential lawsuits.

In summary, although the PFDR rule is still in its final development stages and it’s feasible that regulations may evolve, prepare by staying informed and adapting your strategies accordingly.

By investing in legal counsel early on, you can leverage the expertise of professionals to mitigate risks, prevent costly mistakes and take advantage of the opportunities presented by this new regulatory landscape. For legal inquiries, please contact us at Pastore LLC.

This article is intended for informational purposes and does not constitute legal advice.

(Julie D. Blake, JD, LLM, CIPP, CIPM, is an experienced commercial litigator and data privacy expert with expertise in cybersecurity, data privacy breaches, risk assessment and data privacy policy review.)

Preparing for the Impending AI Regulations: A Legal View

Posted on by Kelly McElroy

Due to artificial intelligence’s (AI) significant impact on business operations, companies must stay informed on evolving data privacy and transparency regulations. Recent research shows a steady increase in global AI adoption, with 35% of companies incorporating AI into their operations and another 42% considering it. Furthermore, 44% of organizations strive to integrate AI into their existing applications and processes.

Discover how to start preparing for forthcoming AI regulations that will govern the ethical use of this technology. This will help avoid problems like legal issues, fines, damaged reputation and loss of customer trust.

On Oct. 30, 2023, the White House issued an executive order to manage AI risks and expanded on the voluntary AI Risk Management Framework released in January 2023. The directive aims to ensure the safe, responsible and fair development and use of AI. Federal authorities will evaluate AI-related threats and provide guidelines for businesses in specific industries according to the following timeline:

  • Within 150 days of the date of the order: A public report will be issued on best practices for financial institutions to manage AI-specific cybersecurity risks.
  • Within 180 days of the date of the order: The AI Risk Management Framework, NIST AI 100-1, along with other appropriate security guidance, will be integrated into pertinent safety and security guidelines for use by critical infrastructure owners and operators.
  • Within 240 days of the completion of the guidelines: The Federal Government will develop and take steps to mandate such guidelines, or appropriate portions, through regulatory or other appropriate action. Also, consider whether to mandate guidance through regulatory action in authority and responsibility.

The Office of Management and Budget (OMB) released a new draft policy on Nov. 3, 2023. The policy is seeking feedback on the use of AI in government agencies. This guidance establishes rules for AI in government agencies. It also promotes responsible AI development and improves transparency. Additionally, it safeguards federal employees and manages the risks associated with AI use by the government.

Here are some approaches to consider when planning for the impending AI regulations:

Stay Well Informed  

Constantly monitor the development of AI regulations at the local, national and international levels. Examine which regulations directly impact your company’s use of AI. Consult with legal counsel specializing in AI and technology law to thoroughly understand how it will affect your company. Also, become acquainted with core legal principles rooted in AI regulations.

Conduct a Risk Assessment

A risk assessment is crucial for compliance and reducing legal liability, especially with emerging AI regulations. Begin by analyzing your AI systems for possible violations of existing laws and regulations, including consumer protection, anti-discrimination and data privacy.

Since AI systems gather and process large quantities of personal data, data protection and privacy are concerns. Companies should assess whether their AI systems comply with applicable data protection laws, such as the California Consumer Privacy Act (CCPA).

Regarding anti-discrimination, companies should assess whether their AI systems are unbiased and initiate measures to mitigate any probable biases. Finally, create plans for any uncovered legal risks.

Create a Powerful Infrastructure

Determine whether existing procedures and policies sufficiently tackle AI development, deployment and usage. Make certain the right contractual agreements are in place with technology vendors, data providers and other stakeholders.

In compliance with pertinent data privacy regulations, create strong data governance procedures for collecting, storing and using personal data. Regularly monitor and audit AI systems to detect legal compliance issues. Lastly, develop a thorough plan for responding to potential legal events such as data breaches.

Partner with Legal Experts

A team of legal experts specializing in AI can help ensure that legal considerations are incorporated throughout the development and deployment process. Companies can lower their legal risk by partnering with an external legal counsel specializing in corporate AI and other technology areas, including cybersecurity.

In conclusion, addressing the legal aspects of AI improves compliance, and builds trust and confidence with stakeholders. Is your company legally protected in the AI-driven arena? For legal inquiries, please contact us at Pastore LLC.

This article is intended for informational purposes and does not constitute legal advice.

(Joseph M. Pastore III is chairman of Pastore, and focuses his practice on the financial services and technology industries, representing major multinational companies in state and federal courts, as well as before self-regulatory organizations such as FINRA, and government agencies such as the SEC.)

(Julie D. Blake, JD, LLM, CIPP, CIPM, is an experienced commercial litigator and data privacy expert with expertise in cybersecurity, data privacy breaches, risk assessment and data privacy policy review.)

Beyond Privacy Consent: How ‘Delete Act’ Changes Game for Companies

Posted on by Kelly McElroy

Companies provide data privacy consent to consumers as part of a “safe harbor” practice, but time may be running out.

After all, the common ritual of privacy consent is flawed.

Let’s say a consumer goes online and wants access to some information on your company’s website. Up pops a window with a privacy consent form that needs a signature. The convoluted language seemingly goes on forever, but clicking a box for approval makes it all go away.

Viola!

Now, the consumer can review their long sought-after information by checking a box. But let’s stop right there.

Private data, which is more valuable than oil these days, is a lot like medication. Yet, we don’t let people take medicine without prescriptions because we know people can’t possibly understand all the particulars of medical terminology and decide for themselves.

In other words, we are putting privacy content into the hands of people who don’t understand it. Meanwhile, consumers are granting access to companies with legacy systems that may not have the ability to categorize the inventory—let alone identify it—even though the surging volume may rival the Library of Congress.

The court of public opinion is catching on. In a recent poll from Pew Research Center, a majority of Americans are concerned about their privacy in the hands of companies:

  • 81% of US adults are concerned about how companies use the data collected about them.
  • 67% of US adults have little to no understanding of how companies use the data they collect about them.
  • 72% of Americans say there should be more regulation than there is now.

Well, the people may get what they want, so companies should begin protecting their assets now. Remember, the rest of the Bill of Rights don’t count if you don’t have privacy. If you can’t say what you want to someone without it becoming public, then that is really a violation of your First Amendment rights. Everything flows from privacy—even though it is not written in the US Constitution.

So why is the status quo changing for companies when it comes to privacy consent? One word: California.

The Golden State’s Long Legislative Arm

California Governor Gavin Newsom recently signed the Delete Act (Senate Bill 362) into law, which gives consumers the ability to have companies delete their personal information with a single request.

The new law requires “data brokers”—companies that sell or rent the personal data that they collect from customers—to register with the newly created California Privacy Protection Agency (CPPA) public registry and disclose the information they collect from consumers, as well as ongoing opt-out requests.

The Delete Act also charges CPPA to create a website and database where state residents can opt out from tracking and request data removal from a set process.

From a consumer perspective, the new law creates a sea change in California. Currently, there isn’t a uniform approach for consumers to request data removal from a data broker. And once it happens, private information can resurface due to the nature of ongoing data collection.

From a corporate perspective, the new law has a long reach. If California were its own country, it would have the fifth-largest economy in the world. In other words, it carries sway. In addition to data privacy, California has a long track record of influencing legislative issues involving labor, the environment and marijuana just to name a few.

Since the CPPA was signed into law in 2018, another ten states have enacted comprehensive data privacy laws. Bloomberg Law reports that at least 16 states have introduced privacy bills that include protections for health and biomedical identifiers in the 2022-2023 legislative cycle.

Of course, different states with different laws could motivate Congress to streamline data privacy on a national scale. Most likely, certain differences will be settled in a court of law, which is why an ounce of prevention now will be worth a pound of data.

A Golden Opportunity for Companies

The CPPA may have until January 1, 2026, to create a database that will allow quick data deletion, but companies should act now to get out in front of the new norm for doing business.

While the government can step in and create a national system to safeguard data privacy, it would be best for companies to take the lead and show consumers how it can be done while protecting Corporate America’s most valuable assets.

In the dawn of the new age of data privacy, companies need to go beyond providing data privacy consent. Instead, corporations need to set up their own internal systems—privacy by design—

that documents where the data is being stored, how it is used and who has access to it.

Most importantly, companies need to conduct internal reviews of their data inventory to make sure what they are using as privacy protection is actually providing protection. This is where the potential legal problem arises. If a company complies with the law in such a way that it is not complying—and management is unaware—the company will be accountable and pay the price, which could be steep.

Moving forward, think about personal information like a book in the library. When someone needs it, it will need to be checked in and checked out. If someone wants to know my birthdate, there should be a record of who, why and when.

Companies should work with a legal team with data-privacy experience that could conduct a privacy analysis of their existing processes and inventory. The outcome should be a report that identifies areas of exposure—possible causes of action—from the mindset of a plaintiff’s attorney, as well as recommendations to proactively address any looming surprises.

As the notion of privacy is reimagined in a digital world, providing data privacy consent forms will no longer be enough to protect a company’s balance sheet.

(Julie D. Blake, JD, LLM, CIPP, CIPM, is an experienced commercial litigator and data privacy expert with expertise in cybersecurity, data privacy breaches, risk assessment and data privacy policy review.)

Understanding Connecticut’s Legal Landscape for Health and Fitness Businesses

Posted on by Kelly McElroy

Introduction

The health and fitness sector is a rapidly growing industry, particularly in Connecticut, where there’s a burgeoning market for everything from gyms and yoga studios to dietary supplements. However, this growth comes with its share of legal complexities, often specific to the state of Connecticut. At Pastore LLC, we offer specialized legal services in both corporate litigation and transactional matters, and we are committed to helping companies of all sizes navigate this intricate legal landscape.

Connecticut State Regulations

Licensing and Certification

In Connecticut, gyms and health clubs are required to register with the Department of Consumer Protection. There may be specific requirements for other types of health and fitness businesses as well, such as yoga studios or martial arts centers.

Health and Safety Codes

Connecticut has specific safety standards that health and fitness establishments must meet. This includes proper maintenance of equipment, appropriate medical readiness, and sanitation standards, among others.

Labor Laws

Employee Contracts

In Connecticut, while employers must comply with federal labor laws, they must also be mindful of the state’s particular regulations, including those pertaining to minimum wage, overtime, and occupational safety. Additionally, Connecticut imposes specific limitations on the enforceability of non-compete and non-solicitation clauses in employment agreements. These restrictions aim to balance the protection of business interests with the right of individuals to work and engage in their profession freely. Consequently, it is crucial for employment contracts drafted within Connecticut to conform to both federal standards and these nuanced state-specific legal obligations to ensure they are legally sound and enforceable.

Independent Contractors vs. Employees

The classification of workers as either employees or independent contractors is a hot topic in Connecticut and misclassification can result in hefty fines. Make sure you’re familiar with Connecticut’s criteria for classification to avoid legal pitfalls.

Liability and Insurance

Premises Liability

Business owners in Connecticut are required to keep their property “reasonably safe” for visitors. Failure to do so can result in liability for any injuries that occur on your premises.

Indemnity Agreements

These are especially crucial for businesses in the health and fitness industry, where there’s a high potential for injury. Connecticut law has specific requirements for these types of agreements, so they must be drafted carefully.

Data Privacy

Connecticut has enacted various laws to protect consumer privacy, including the Connecticut Insurance Information and Privacy Protection Act. If your health and fitness business collects personal or health data, you must ensure compliance with these state-specific regulations, in addition to federal laws like HIPAA.

Intellectual Property

Connecticut has established protections for trade secrets through the adoption of the Connecticut Uniform Trade Secrets Act (CUTSA), codified in Conn. Gen. Stat. Ann. §§ 35-50 to 35-58. CUTSA provides a legal framework for the protection of business information and know-how, defining trade secrets and setting forth the remedies available to victims of trade secret misappropriation. Through this act, Connecticut ensures that businesses can safeguard their competitive edge by securing their proprietary information.

In addition to CUTSA, federal laws apply. Local practices can influence the process and enforcement, making it valuable to consult with legal professionals familiar with the Connecticut business environment.

Conclusion

Operating a health and fitness business in Connecticut comes with numerous state-specific legal considerations, from licensing and labor laws to liability and data privacy regulations. At Pastore LLC, we specialize in helping businesses navigate these complexities effectively. If you’re looking to understand your legal obligations better or require assistance with corporate litigation or transactional matters, contact us today.

 

This article is intended for informational purposes and does not constitute legal advice.

(Paul Fenaroli is an Associate Attorney at Pastore admitted in Connecticut and the District of Connecticut. He provides private companies with a full range of business law services covering formations, mergers, acquisitions, corporate governance, securities offerings and litigation)

Managing Legal Issues in the Health and Fitness Industry

Posted on by Luke Daigle

The health and fitness industry is booming, driven by a collective focus on well-being, technology advancements, and an increasingly health-conscious consumer base. However, this growth often brings a complex landscape of legal challenges that mid-sized companies need to navigate. At Pastore LLC, we specialize in both corporate litigation and transactional matters, and we’re here to share some critical legal insights tailored to businesses like yours.

Regulatory Compliance

FDA and FTC Regulations

If your company is involved in the manufacturing or marketing of dietary supplements, equipment, or health services, you’re likely subject to regulations from the Food and Drug Administration (FDA) and the Federal Trade Commission (FTC). Compliance is critical, as failure to meet these standards can result in severe penalties.

State-Specific Regulations

Depending on your jurisdiction, state-specific laws may affect your business, such as licensing requirements for fitness trainers or specific disclaimers needed for health advice.

Intellectual Property

Trademarks

Your brand is one of your most valuable assets. Ensure that your company’s name, logo, and any proprietary procedures or technologies are appropriately trademarked to protect them from unauthorized use.

Patents

If your health and fitness company has developed a unique piece of equipment or technology, consider patenting it to protect your competitive edge.

Contractual Obligations

Vendor Contracts

Your relationship with vendors is often governed by contracts. Be vigilant in understanding terms concerning quality, delivery timelines, and payment conditions.

Employment Contracts

Non-compete and confidentiality agreements can safeguard your business secrets. Always consult with legal experts when drafting these contracts to ensure they’re enforceable.

Data Privacy

Health and fitness companies often collect a lot of personal and health-related data. Familiarize yourself with data protection regulations such as GDPR or HIPAA, if applicable, to protect your company from legal repercussions.

Liability and Insurance

Premises Liability

If you operate a physical location, such as a gym, it’s essential to understand premises liability and have appropriate insurance coverages in place.

Product Liability

Manufacturers and suppliers in the health and fitness sector are often targets for product liability claims. Comprehensive insurance can provide a financial safety net.

Conclusion

Legal complexities in the health and fitness industry are numerous, but proactive steps and knowledgeable legal guidance can help you navigate them successfully. At Pastore LLC, we are committed to providing high-end, specialized legal services that can help your company not only survive but thrive. Contact us to learn more about how we can assist you in facing these challenges effectively.

For legal inquiries, please contact us at Pastore LLC.


(Paul Fenaroli is an Associate Attorney at Pastore admitted in Connecticut and the District of Connecticut. He provides private companies with a full range of business law services covering formations, mergers, acquisitions, corporate governance, securities offerings and litigation)

Understanding the Legal Landscape and Navigating Challenges

Posted on by Kelly McElroy

Mid-sized businesses, often viewed as the backbone of many economies, enjoy several advantages due to their scale and flexibility. However, their position in the marketplace can also make them susceptible to various legal challenges. Understanding the landscape of business litigation can be instrumental in helping these enterprises prepare for, respond to, and navigate legal disputes.

What is Business Litigation?

At its core, business litigation involves disputes arising out of commercial and business relationships. These include issues related to contracts, partnerships, and transactions. For a mid-sized business, litigation can come in various forms – from a dispute with a supplier over contract terms to a disagreement with a competitor over intellectual property rights.

Why Mid-sized Businesses?

Larger corporations often have entire legal teams dedicated to handling disputes, while smaller businesses might fly under the radar or lack the extensive contracts and partnerships that can lead to litigation. Mid-sized businesses, however, often engage in a significant number of transactions, making them more vulnerable to disputes, but may not always have the extensive in-house legal resources of larger corporations.

Common Types of Lawsuits Involving Mid-sized Businesses:

  • Contract Disputes: The foundation of many business relationships, contracts, if ambiguous or breached, can lead to significant disagreements.
  • Shareholder and Partnership Disputes: Differences in opinion among business partners or shareholders can lead to internal strife and potential litigation.
  • Employment Disputes: These can range from wrongful termination claims to wage and hour disputes.
  • Intellectual Property Disputes: As businesses grow, protecting their intellectual assets becomes crucial, leading to potential disagreements with competitors or even within the industry.
  • Real Estate and Property Disputes: These can involve lease agreements, property rights, or disputes related to property values and damages.
  • Consumer-related Lawsuits: These can arise from claims of false advertising, product defects, or other consumer protection issues.

Preparation is Key

For mid-sized businesses, the adage “an ounce of prevention is worth a pound of cure” holds. Here are some proactive steps:

  • Clear Contracts: Ensuring that all business contracts are clear, specific, and legally sound can prevent many disputes.
  • In-house Counsel or Retained Lawyers: Having a dedicated legal advisor, even if on a retainer basis, ensures that the business has someone familiar with its operations and ready to advise when needed.
  • Insurance: Various insurances, like liability or errors and omissions insurance, can help protect against potential litigation.
  • Employee Training: Ensuring that employees are well-trained, especially in areas like compliance, can prevent issues down the line.

Conclusion

While business litigation is a reality that many mid-sized businesses may face, understanding the landscape and being prepared can make a significant difference. With the right strategies and resources, businesses can navigate these challenges effectively, ensuring that they continue to thrive and grow in a competitive marketplace.

 

(Paul Fenaroli is an Associate Attorney at Pastore admitted in Connecticut and the District of Connecticut. He provides private companies with a full range of business law services covering formations, mergers, acquisitions, corporate governance, securities offerings and litigation)

Appellate Attorneys Increase ROI

Posted on by Kelly McElroy

Many think of appellate attorneys only after a court case has been won or lost at the trial level, but ensuring from the start that your trial team includes an attorney with strong appellate expertise can translate into real savings for your bottom line. Hiring an attorney with deep appellate experience protects the investment you make at the trial level and strengthens your position should you choose or face an appeal.

Consider a sample of the special skills that appellate attorneys provide to ramp up return-on-investment:

Picking Your Battlefield

If you or your business face serious legal and financial exposure in a case, ensuring that your trial team includes an appellate attorney to counsel as to where to bring a case (when there is a choice) can impact the potential for appeals. For example, it is very difficult to appeal an arbitration decision, so selecting arbitration versus court litigation necessarily restricts the potential for any successful appeal – depending on your case, there may be strategic reasons to limit appeal and select arbitration (if you can). In terms of court selection, there may be more than one choice, including federal or state, and one state’s laws and precedent could be far more favorable to your case than another state’s. Such breadth of knowledge from the inception of a case is invaluable. Litigators with strong appellate experience see the entire forest, not just the trees (and weeds) of trial.

Making Your Record

Appellate courts rarely look outside the “record,” meaning the transcripts of testimony and evidence presented during trial. Arguments or objections that could have been made but were not are usually lost and cannot be made on appeal (“waived”). Many litigants are surprised to learn that they do not have a solid appeal because their trial attorney did not make the proper motions or objections, or introduce key evidence, during trial. Attorneys with comprehensive knowledge of the appeals process not only have a deep understanding of legal principles and process at the appellate level, but also know how to increase the likelihood of success on appeal by creating a good record and ensuring that all appealable issues are preserved and not waived. Trial attorneys with appellate experience can also create opportunities for “interlocutory” appeals – appeals of certain issues before there is a final judgment.

Assessing Your Likelihood of Success on Appeal

Whether you have won or lost at the trial level, there are many factors to consider. If you won, the other side may appeal and your choices are limited: defend the appeal or try to settle. If you lost, even if the trial court got something wrong, your likelihood of success on appeal may be limited by the discretion afforded to fact-finders. Even when reversible error on case-determinative issues gives you the highest likelihood of success on appeal, the cost of pursuing an appeal may outweigh the cost of satisfying judgment. Litigators with appellate expertise provide neutral assessment of all of these factors.

Understanding Business Considerations

A legal case is more than an argument under applicable facts and law – it is also a cost-benefit analysis. Litigators with strong appellate experience will objectively advise as to not only the likelihood of success on appeal, but also as to the impact of an appeal on certain business considerations – not just your bottom line, but the potential for precedent impacting your business in the future. Appellate attorneys should objectively assess your case and understand your business objectives to counsel whether to appeal (if an option), defend an appeal, or settle, taking you to the best possible result within a complex framework of rules and timelines.

Knowing the Audience

Appellate attorneys put themselves into the shoes of an appellate court judge. What are the issues on appeal, why are they important, and why are some issues not worth appealing? A witness may have lied, but an appellate court will defer to the fact-finder that was in the courtroom to assess the credibility of that witness. You may have had a winning argument, but if it was not made at trial you likely cannot make it on appeal.

A good appellate attorney objectively assesses the record, spots the strongest arguments for overturning or affirming the decision below, understands precedent and any public policy implications and presents well-researched and compelling arguments to the appellate court, both in written briefs and at oral argument.

Presenting your best arguments on appeal requires a nuanced understanding of how appellate judges think. Select an appellate attorney who not only deep dives into research and is a strong and persuasive writer, but who anticipates the other side’s arguments and, more critically, intuits the issues most important to the appellate court. Less is often more, both in terms of selecting the issues to appeal and in writing concise and compelling briefs. At the end of the day, a good appellate advocate tells and sells your story.

“Appellate records are longer than they once were, and oral arguments are more compressed, but even in the electronic age, the essential art of appellate advocacy – and of appellate judging too, I believe – has remained constant.” Ruth Bader Ginsburg, Remarks on Appellate Advocacy, 50 S. C. L. Rev. 567, 570 (1999). Because appellate advocacy is most certainly an art form, it pays to carefully select your artist.

(Leanne Murray Shofi is Special Counsel at Pastore in Stamford, Conn., with 20+ years of litigation and appellate experience within the Connecticut and New York state and federal courts.)

Why Looming Crypto Lull Will End

Posted on by Kelly McElroy

Crypto will reach its potential in the next two years.

For those who may think that is a long time, remember that this burgeoning digital asset industry has percolated in the background since the first block of bitcoin was mined in 2009.

For those who may think that it is way too soon amid today’s environment, keep the faith.

Figuratively speaking, crypto 2023 is like accumulating debris in a back churn, where a creek’s flow attempts to force its way into a much larger lake. That is where crypto is right now. It is trying to make it out into the mainstream but is being held back. There is no momentum pushing it forward.

But crypto’s lull is coming to an end.

Ford Motor Company founder Henry Ford, who revolutionized the automobile industry with his assembly-line innovation, once said, “Patience and foresight are the two most important qualities in business.”

There are several reasons why today’s headlines signal a final push forward for crypto’s acceptance.

Too Difficult to Regulate Through Litigation

The Securities and Exchange Commission (“SEC”) continues to argue that it should oversee cryptocurrencies because they are securities—aside from Bitcoin—under the Howey test, which is a 1946 Supreme Court decision that is used today to determine what is an investment contract.

SEC Chair Gary Gensler said, “At the core, these (altcoin) tokens are securities because there’s a group in the middle and the public is anticipating profits based on that group,” during an interview with New York Magazine.

The SEC has turned its belief as the presumed overseer into a basis for lawsuits against significant players in the crypto space. Despite the SEC’s stance, regulation through litigation is not an appropriate method for the crypto industry.

The agency has filed 13 charges against the world’s largest crypto exchange, Binance, and its founder, Changpeng Zhao, alleging that both allowed certain U.S. residents on its exchange despite restrictions.

The SEC also has sued the world’s second-largest crypto exchange, Coinbase, alleging the platform operated as an unregistered national securities exchange and broker. The agency also alleged that at least 13 specific crypto assets that Coinbase offered were “crypto asset securities” and that its staking program counts as an investment contract for an unregistered security.

Coinbase has stated in an article on its website that it had met 30 times with the SEC during a nine-month period to set up a registration process for crypto companies. Instead of a path forward, however, the exchange said it received legal threats in the form of a Wells Notice.

At some point, most likely by the first of next year, both cases will be settled. The decisions in the Coinbase and Binance matters will help push crypto forward.

Too Difficult to Argue with Success

U.S. District Judge Analisa Torres handed crypto a memorable win in July, ruling that Ripple Labs’ XRP crypto token is not necessarily a security on face value—an opinion that counters the SEC’s stance.

The judge segmented the different sales methods involving XRP, which included programmatic sales, institutional sales and “other distributions” like employee compensation. XRP was ruled a security when it involved institutional sales that were distributed to sophisticated individuals. However, XRP was ruled not to be a security during “retail” or programmatic sales and other distributions.

Judge Torres also dismissed the agency’s interlocutory appeal, which is essentially an appeal before a final outcome. The court has set an April 24, 2024, date to decide the remaining issues regarding XRP.

But the matter may not be settled yet. Sometimes courts disagree.

In a separate securities case involving the collapsed TerraUSD, Anchor Protocol and LUNA, U.S. District Court Judge Jed Rakoff has rejected Judge Torres’ ruling, which parsed the nature of distributions.

“Howey makes no such distinction between purchasers,” said Rakoff, whose comments were published in Coindesk. “And it makes good sense that it did not. That a purchaser bought the coins directly from the defendants or, instead, in a secondary resale transaction has no impact on whether a reasonable individual would objectively view the defendant’s actions and statements as evincing a promise of profits based on their efforts.”

Crypto’s formal acceptance will most likely include notes from the highest court in the land. Do not be surprised if the U.S. Supreme Court adds an additional layer to the existing Howey test in the next two years to address Crypto’s status.

Too Difficult to Stifle Innovation

Fictional race car star Ricky Bobby, played by actor Will Ferrell in Talladega Nights, once said, “If you ain’t first, you’re last.”

That is the American ethos in a single sentence.

It is also another reason why the United States lagging, global position will change soon. After years of inaction from a nation built on innovation, the United States finds itself trailing other countries and regional blocks like Singapore, Japan and the European Union on advancing a framework that would allow crypto and digital assets to stake its place.

However, additional court wins have already started a momentum shift, which will lead to new products in the marketplace.

The D.C. Circuit Court of Appeals, for example, ruled that the SEC’s rejection of Grayscale Investments (“Grayscale”) proposed conversion of its closed-end bitcoin trust into an ETF was “arbitrary and capricious.” The three-judge panel said the agency failed to explain the difference between a futures bitcoin EFT, which it had approved, and a spot bitcoin ETF.

Grayscale’s victory will most likely have far-reaching implications that will change the financial landscape, ushering in a new asset class. Competitors such as BlackRock, Fidelity, Invesco and WisdomTree are also standing in line waiting to have their spot bitcoin ETF proposals approved by the SEC. The agency has 240 days to approve or deny applications, which means the first deadline for the earliest applicant would be January 10, 2024.

Nothing is holding the SEC back from approving all the applications, including ones for a spot Ethereum ETF, at the same time.

“The fact that SEC is actively engaging with spot bitcoin issuers on their current applications—which hasn’t ever happened before—we think a rejection is unlikely and hold a 75% chance of approval by end of this year,” said Bloomberg Senior ETF Analyst Eric Balchunas in a recent Forbes article.

To encourage even more momentum, the next bitcoin “halving,” an event that in effect cuts supply every four years, will occur in April. This event typically starts the next crypto bull run.

Right now, my Texas intuition tells me that crypto is a lot like a nice piece of brisket in the making. Trim off the fat on top to let the smoke in and then slow-cook the rest until tender. It rewards those who are patient.

The crypto lull is coming to an end.

(Tyler W. Rutherford is an associate attorney at Pastore with expertise in regulatory compliance, contract law and corporate law. He represents a wide range of clients, including crypto and blockchain companies.)

7 Questions to Ask Potential Business Partners About the Firm

Posted on by Kelly McElroy

Business partnerships can be very successful when they work.

These alliances are utilized to monetize relationships that bring in top-line revenue. They can also serve as a catalyst for more opportunities that will lead to top and bottom lines. Almost half (44%) of companies create alliances for new ideas, according to BPI Network. Harvard Business Review says most of tech’s executives (94%) envision partnerships as a fundamental part of their overall business plan.

Despite the promise, however, research finds that most business partnerships fail.

This type of angst makes the interviewing process even more important. The next time you need a new business partner, make sure a series of questions is asked about how prospective partners expect to play nicely with the existing operations, as well as each existing partner.

Business Partnership Insight: 1. What are your expectations of each owner?

Figuring out how each business partner fits together is an important question that you will need to address sooner rather than later. The topic of gross negligence, when a partner harms another by failing to provide a certain standard of care, is one of the more common reasons why business partnerships fail. Assessing each partner’s motivation, which is closely tied to expectations, should jibe with the business partnership agreement and operations plan to increase chances for success.

Business Partnership Insight: 2. What is your vision for the firm?

This question asks about what the prospective business partner wants from the venture. New business partners can bring new thoughts, ideas and motivation that can propel the company forward. New energy, however, doesn’t always have a positive impact. Are the prospective partner’s goals in line with the other partners? Would the candidate’s management style elevate the firm? Breach of Partnership/Operating Agreement is another common legal problem that can doom a business partnership. The best time to discuss alignment is during the interview process.

Business Partnership Insight: 3. How would you manage the departure of a partner?

This is why you need a comprehensive business partnership agreement. Depending on how many partners you have in the firm, the departure of a business partner can be quite involved in varying degrees. Typically, there are four options. The fastest option is for the remaining partners to buy out the shares of the departing partner. If the departing partner played a large role in the company, then perhaps selling the business would be the best option.

Dissolving the business, on the other hand, could be the best option. This option could also be spelled out in the business partnership agreement to avoid a potentially lengthy legal battle, which is possible when one partner disagrees.

Replacing the departing business partner is another option. Although it would take more time than a buyout, it wouldn’t impact the resources of existing partners and would create an opportunity to bring on someone with a different perspective and skill set.

Business Partnership Insight: 4. What experience do you have with business partnerships?

Being an employee and being a business partner are two different things. Partners, for example, must act in good faith and fairness as part of their fiduciary duty to other partners.

Mismanaging company funds, damaging the firm’s reputation or “goodwill” and putting the company at legal risk due to your own negligence would be examples of a breach of fiduciary duty.

Along with ownership comes more legal responsibilities that must be considered.

Business Partnership Insight: 5. What is your experience with sales and margins?

In sports, it has been said that winning is the best deodorant. Success tends to cover missteps and miscues.

In business, top-line sales and margins are important factors when determining success. When those two items are realized, however, there could be finger-pointing. The setback could also encourage business partners to lose interest as they put their energy behind other entities. Partnership abandonment is a real legal issue for business partnerships, and it is another reason why you need to work with a trusted legal advisor to ensure all possible outcomes are covered in writing before they occur in your business partnership.

Business Partnership Insight: 6. How can this firm take it to the next level in the next 12 months?

This question is about resources and how they will be utilized. When asking about the path forward, a prospective business partner will have to disclose specifics about the “how” as well as the “why” behind the plan.

In the big picture, business partners are very important, in-house resources that should be utilized fully based on areas of expertise. Delegating the work can be a challenging area for partners. Failure to delineate authority is another common legal issue that surfaces with business partnerships. The operating agreement should contain enough detail so partners understand how they can make a meaningful contribution while staying in their own lane.

Business Partnership Insight: 7. Looking ahead 12 months, you believe that you made a great decision by joining this partnership. What are the two reasons?

This question asks, “What do you want?” in a different way, which tends to draw more specifics about the prospective business partner’s intentions. The more insight that the existing partners gather before an offer is made, the better for the entire venture. Making time for due diligence will pay dividends figuratively and literally.

(Paul Fenaroli is an Associate Attorney at Pastore, a law firm that helps corporate and financial services clients find creative solutions to complex legal challenges. He can be reached at 203.658.8470 or pfenaroli@pastore.net.)